Strike fallout hits Old Mutual sales

Companies / 8 August 2014, 08:00am

Richa Naidu

THE ECONOMIC fallout from mining strikes across South Africa would weigh on full-year sales, Old Mutual said yesterday, sending stock in the Anglo-South African financial group down as much as 4 percent in morning trade in London.

Chief executive Julian Roberts said a pick-up in inflation coupled with two sets of mining strikes in South Africa, its main market, had affected economic growth and, in turn, consumer sentiment.

“The consumer is under pressure and that will feed through into lower sales [than expected],” Roberts said, adding annual premium equivalent (APE) growth would be at the lower end of the cycle forecast of 10 percent to 15 percent.

APE, a sales measure used by British insurers and asset managers, estimates the sales of an asset by taking the value of regular premiums and adding 10 percent of any new single premiums written for the fiscal year.

Old Mutual, which provides life insurance, banking and wealth management services in Africa, Britain and the US, posted a 17 percent rise in first-half adjusted operating profit to £761 million (R13.8 billion) on a constant currency basis.

Adjusted earnings a share of 8.8p in the six months to June were up 16 percent year on year in constant currency, but down 5 percent in reported currency. Funds under management were £300.5bn, up 5 percent in constant currency, and up 2 percent in reported currency, compared with the figure at the end of last year.

While the underlying result served as further indication of the potential within Old Mutual, the stock continued to be suppressed by concerns over economic growth in South Africa, performance of the rand and a weak dollar, Bernstein Research analyst Edward Houghton said.

The firm raised its interim dividend 17 percent to 2.45p.

Old Mutual’s JSE-listed shares fell as much as 3.7 percent and closed 1.62 percent lower at R34.55. – Bloomberg